U.K. Services Grow Most in 14 Months on Olympics, Auto Sales

Sept. 28 (Bloomberg) -- Britain’s services industry
expanded at its fastest pace for more than a year in July,
adding to evidence that the economy returned to growth in the
third quarter.

Services, which account for about three quarters of the
economy, grew 1.1 from June, when the sector fell 1.5 percent,
the Office for National Statistics said in London today. It was
the biggest increase since May 2011.

Activity rebounded in July after being hampered the
previous month by an extra public holiday for Queen Elizabeth
II’s Diamond Jubilee. Output rose across the sector, with a jump
in auto sales driving a 1.8 percent gain in distribution, hotels
and restaurants. There was also a boost from Olympic ticket
sales.

“The fact that the dominant services activity saw a decent
rebound in July from June’s distorted drop is a significant
boost to third quarter growth hopes,” said Howard Archer, an
economist at IHS Global Insight in London. “While the latest
news on the services sector is largely encouraging, they still
face challenging conditions that are likely to limit their
activity in the near term at least.”

The figures come after data yesterday showed the economy
shrank less than previously thought in the second quarter and
personal incomes rose at the fastest pace for three years.

The pound was lower against the dollar after the report at
$1.6220 as of 9:58 a.m. in London, down 0.1 percent on the day.

Olympics Boost

In a separate release, the statistics office said output
per worker fell 1.3 percent in the second quarter from the
first. Unit wage costs, or the amount spent on wages and
salaries to produce each unit of output, rose 2 percent, the
most for three years. The market sector, which mainly consists
of private firms, saw productivity fall 1.5 percent to its
lowest level since 2005.

The figures will deepen what analysts term Britain’s
“productivity puzzle” as the economy has continued to create
jobs in the face of the recession.

The ONS also said Northern Rock Asset Management and
Bradford and Bingley Plc had been reclassified as central
government bodies, as of January and July 2010 respectively.

The change has increased U.K. general gross government debt
and lowered the deficit, although there will be no significant
impact on broader measures of the public finances as the two
institutions were already included in the public sector as
government-controlled financial institutions, the ONS said. They
will be fully incorporated in the public sector finances and
national accounts reports from early 2013.